Dana India Pvt. Ltd. Vs DCIT (ITAT Pune)
ITAT Pune held that foreign exchange gain/loss which has arisen from exports/imports of the product/materials which are in the ordinary course of business of the assesses are included as operating cost.
Facts-
The issue in the present case is that the assesse treated the Foreign Exchange fluctuation gain as an operating revenue, whereas, the Transfer Pricing Officer (TPO)/Assessing Officer (AO), based on their decision on Rule 10TA of the Income Tax Rules of 1962, considered the fluctuation gain as non-operating revenue, resulting and influence in the assessor’s capacity to calculate its profit level indicator (PLI).
Conclusion-
We observe that we have held in the case of the assessee that foreign exchange gain/loss which has arisen from exports/imports of the product/materials which are in the ordinary course of business of the assesses are included as operating cost. This is in conformity with the decision of the Tribunal in earlier year (supra) orders of the assessee and following the same parity of reasoning and in the same set of facts and circumstances the same is allowed for this year also. In view of these findings, the additional ground filed by the assessee is therefore, rendered academic in nature.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal preferred by the assessee emanates from findings of the Ld. Disputes Resolution Panel-3, Mumbai-2, (here in after referred to as “the DRP”) dated 20-08-2018 for A.Y. 2014-15 u/s 144C(5) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) as per the following grounds of appeal.
“Being aggrieved by the assessment order finalized u/s 144C(3) r.w.s.143(3) of the Income `Tax Act, 1961 by the learned Deputy Commissioner of income Tax, Circle 1 (2), Pune (AO) consequent to the directions of the Hon’ble Dispute Resolution Panel-3,Mumbai (DRP) in the case of Dana India Private Limited (the appellant), your appellant submits following grounds which are without prejudice to each other for Your due and sympathetic consideration:
On the facts and circumstances of the case and in law
I. Transfer Pricing ( TP) adjustments:
Against the adjustments made under Transfer Pricing assessment
The learned TPO/AO erred in making aggregate upward adjustment of Rs. 13.06 crores ( Page 7 Para 6 of A O’s final order) to the Arm’s Length Price (ALP) of the international transactions in the manufacturing segment entered into by the appellant.
In making the said aggregate TP adjustment the AO/ TPO further erred inter alia
2. In excluding realized forex gain Rs. 4.37cr. earned on exports of manufactured components and insurance claim receipt of Rs. 6 lakhs in respect of export consignment damage claim from the operating income of the appellant in computing the profit level indicator (PKLI) of Op to OC.
3. In the alternative disaggregating and determining the ALP of international transaction of allocation of cross charge of intra group business support services Rs. 7,64,67,217/- viz. Selling, General and Administration (SG & A) services at ‘nil’ by adopting “other method” without assigning any reason.
The learned TPO/AO further erred in not appreciating that services were inextricably linked with other international transactions in the manufacturing segment and it was impractical to evaluate the transaction separately and the appellant had demonstrated the need, evidence and rendition of said services before the TPO.
4. Without prejudice to the aforesaid ground the appellant further submits that the learned TPO/AO ought to have chosen the AE as the tested party as it was the least complex of parties and for which data was available for comparability analysis.
5. The learned TPO/AO erred in additionally choosing and thrusting so called external comparable companies on her own viz. Enkei Wheels (India) Ltd., RSB Transmissions (I) Ltd., Ring Plus Aqua Ltd., Shivam Autotech Ltd., Wheels India Ltd., Z.F. Steering Gear (India) Ltd., Happy Forgings Ltd., Rico Auto Industries Ltd. and Embross Auto Comp Ltd. even though the functions performed by the aforesaid companies were subject to distinctive set of cost drivers as they are in different segments and perform various functions differently and their finished products catered to customers in completely distinct and different industrial segments and reasonably accurate adjustments to the operating expenses and profit could not have been made to eliminate the material effects of such differences.
6. Not restricting the TP adjustment Rs. 13.06 er. only to the value of international transaction in the manufacturing segment under TNMM on the basis of principle of proportionality.
II. Non Transfer Pricing ( Corporate) issues.
